Econometrics help urgently NEEDED!!

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OliveAnson
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#1
Report Thread starter 4 years ago
#1
Please help me solve the following two questions: (See attachment first 2 questions, if you cant understand from here)

Q1) Suppose the true regression model explaining newspaper sales is given by

𝑁𝑒𝑤𝑠𝑆𝑎𝑙𝑒𝑠 = 𝛽0 + 𝛽1𝑈𝑟𝑏𝑎𝑛𝑃𝑜𝑝 + 𝛽2𝑂𝑛𝑙𝑖𝑛𝑒𝑉𝑖𝑠𝑖𝑡𝑜𝑟𝑠 + 𝑢𝑖
Where:
UrbanPop is Urban Population in millions
OnlineVisitors are monthly website visitors in thousands
NewsSales are monthly sales in thousands

Suppose you do not have the data for OnlineVisitors, and you end up running the following regression:

𝑁𝑒𝑤𝑠𝑆𝑎𝑙𝑒𝑠 = 𝛽0 + 𝛽̃1𝑈𝑟𝑏𝑎𝑛𝑃𝑜𝑝 + 𝑢𝑖

Where 𝛽̃1 is a biased estimator of true 𝛽1 caused by the omitted variable Online Visitors.

The regression result that you get is: 𝑁𝑒𝑤𝑠𝑆𝑎𝑙𝑒𝑠 = 1,300 + 32.6𝑈𝑟𝑏𝑎𝑛𝑃𝑜𝑝
In addition, you have the following regression output:
𝑂𝑛𝑙𝑖𝑛𝑒𝑉𝑖𝑠𝑖𝑡𝑜𝑟𝑠 = 560 + 16.5𝑈𝑟𝑏𝑎𝑛𝑃𝑜𝑝
If the true 𝛽2 = −.23 then find
a) the unbiased (true) 𝛽1
b) size and direction of the bias

Q2) Consider the regression:
𝐶𝑎𝑟𝑃𝑟𝑖𝑐𝑒 = 𝛽0 + 𝛽1𝐶𝑎𝑟𝑆𝑖𝑧𝑒 + 𝛽2𝐻𝑜𝑟𝑠𝑒𝑃𝑜𝑤𝑒𝑟 + 𝑢𝑖
If instead you run a regression and omit the variable HorsePower what is the effect on coefficient of 𝛽1.
a) Does your regression overestimate or underestimate the true 𝛽1?
b) Write an expression for the bias in measured 𝛽1
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04MR17
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#2
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(Original post by OliveAnson)
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Hiya,:hi:

I've made sure that this thread gets moved into a different forum for you, hopefully in here you'll get the replies you're after.



MR


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OliveAnson
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#3
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#3
[QUOTE=04MR17;74127548]Hiya,:hi:

I've made sure that this thread gets moved into a different forum for you, hopefully in here you'll get the replies you're after.



MR


Spoiler:
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:bump:

Thank you so much! I have been waiting forever!
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